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A Wild Week of Ag News, Analyst Says

In the last seven days, China negotiators appeared in Washington to discuss trade issues (tariffs mostly) between the two countries, and the Trump administration moved on a temporary trade solution with Mexico.

China actually started applying tariffs first to U.S. products a few years ago with a 10% tariff on soybeans. Then last December they added a huge tariff (over 80%) on sorghum, which effectively eliminated imports of U.S. sorghum.

President Trump retaliated this year in his much-publicized decision to put 25% tariffs on $36 billion in goods, then added another $14 billion last week, and is in the process of adding 10% to 25% tariffs on another $200 billion in goods.

Up to now, the Chinese retaliated this summer on the first $50 billion (soybeans and others at 25%), but cannot match the $200 billion because China only imports about 25% of the $505 billion we import from China.

The major dispute is still intellectual property, which the U.S. wants China to protect and respect. The only problem is that China, philosophically, doesn’t believe in property rights at all.

They are communists, after all. Communists believe in communal property. Doing all you can to help the rest. Sharing your talents with the communal good. Patents, intellectual property rights, and accumulation of money into the hands of the most creative is not their philosophy, and therefore is not a part of their culture. So to get this issue resolved with China may take a while, if it happens at all.

The other issues, mainly buying more U.S. product (like soybeans and energy), has already been essentially agreed to, and the negotiators understand this. The second major issue, industrial goods, may take more time to resolve.

What would be best and most achievable for farmers is to just adopt the product trade agreement, and agree to disagree on things like intellectual property. Silicon Valley would not like it, but this needs to be done at some point.

U.S., Mexico Trade Agreement

Our Mexico-U.S. trade agreement appears to be a done deal, with the contentious issues on automobiles being resolved satisfactorily for both sides. That is really important to U.S. corn producers, but so far has not had any significant impact on prices.

Trouble is that 25 million acres of demand go away with Chinese soybean imports, and if 10 million more acres go to corn, 5 million to wheat, and the other 10 million to other crops every year, we have too much of everything. And not just one year, but every year until we deal with the oversupply somehow.

Weather forecasts have changed significantly in this morning’s run, moving from warm/wet now (the next seven days is still forecast to be warm/wet) to cold/dry in the eight- to 14-day forecast in this morning’s run.

Temps cool considerably and noticeably, putting a potential frost threat into the northern Corn Belt by the middle of September. Of course, since the crop is advanced a week to 10 days ahead of normal, the damage that could be done is less than normal. But a mid-September frost also would be early, and there still could be some yield damage.

Otherwise, the warm forecast the next seven days, and the normal to above-normal precip over most of the Corn Belt is about a perfect forecast to finish off the crop in 2018.

The Mexico/U.S. trade agreement is near completion, so the NAFTA negotiations are going quite well, and are likely to be concluded soon. The devil is in the details, but President Trump is touting it as a win for the U.S., including U.S. farmers.

The recent crop tour found similar corn yields, but jacked the soybean yield to even above USDA’s extremely high number. Why is everyone estimating such high soybean yields? Is it really there, or is there some other motivation?

Ray Grabanski is President of Progressive Ag Marketing, Inc., the top Ranked marketing firm in the country the past 8 years.

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